Testimony

Statement byWilliam K. Hubbard
Associate Commissioner for Policy and Planning
Food and Drug Administration onInternational Trade and Pharmaceuticals
before theSubcommittee on Health Care and
Subcommittee on International Trade
Committee on Finance
United States Senate

April 27, 2004

INTRODUCTION

Mr. Chairman and Members of the Committee, I am William K. Hubbard, Associate
for Policy and Planning at the U.S. Food and Drug Administration (FDA
or the Agency).
I appreciate the opportunity to testify regarding the cost of prescription
drugs and the issues relating to proposals that would legalize the importation
of prescription drugs into the United States. Although FDA has very limited
expertise in the area of international pharmaceutical trade, we are happy
to provide our perspective on the health and safety issues that are implicated
in the importation of pharmaceutical products into the
United States.

At FDA, our statutory responsibility is to assure the American public
that the drug supply is safe, secure, and reliable. For more than 60 years,
the Federal Food, Drug, and Cosmetic (FD&C) Act has ensured that Americans
can be confident that, when they use an FDA-approved drug, the medicine
will be safe and effective and will work as intended in treating their
illness and preventing complications. In carrying out this responsibility,
FDA also works to do all we can under the law to make medicines accessible
and help doctors and patients to use them as effectively as possible,
through such steps as expanding access to generic medicines, reducing
the time and cost of showing that new medicines are safe and effective,
and providing up-to-date information for health professionals and patients
to obtain the benefits and avoid the risks associated with powerful medicines.
That is the primary mission of the thousands of dedicated staff, including
leading health care experts, doctors, economists and scientists who work
tirelessly at FDA in public service for the American people. FDA has substantial
concerns about unapproved, imported pharmaceuticals whose safety and effectiveness
cannot be assured because they are outside the legal structure and regulatory
resources provided by Congress. We have also taken steps within the law
to improve the availability of affordable medicines and reduce drug costs,
without compromising safety. In my testimony today I look forward to having
the opportunity to engage in a constructive dialogue about the issue of
importing prescription drugs as well as discussing steps to provide greater
access to more affordable prescription medications.

REDUCING DRUG COSTS

FDA shares with Congress its great concern for senior citizens and other
patients who have difficulty paying for prescription drugs. That is why
the Administration worked with Congress to enact the new Medicare prescription
drug law. And that is why FDA has made it a priority for its medical and
scientific experts to establish and expand programs that promote access
to innovative treatments to help Americans live healthier lives and assure
that Americans have access to medications and treatments that they can
afford.

FDA has taken a number of significant steps to provide greater access
to affordable prescription medications, including unprecedented steps
to lower drug costs by helping to speed the development and approval of
low-cost generic drugs after legitimate patents have expired on branded
drugs. Generic drugs typically cost 50 to 70 percent less than their brand-name
counterparts. On June 18, 2003, FDA published a final rule to improve
access to generic drugs and lower prescription drug costs for millions
of Americans. These changes will save Americans over $35 billion in drug
costs over the next 10 years, and will also provide billions in savings
for the Medicare and Medicaid programs. Elements of this rule were codified
as part of the recently enacted Medicare law and, with FDA’s technical
assistance, the law added additional mechanisms to enhance generic competition
in the marketplace.

In addition, last year the Administration supported and Congress enacted
an increase of $8 million for FDA’s generic drug program, the largest
infusion of resources into this program ever. This increase in the generic
drug budget enables FDA to hire additional expert staff to review generic
drug applications more quickly and initiate targeted research to expand
the range of generic drugs available to consumers. Improvements in the
efficiency of review procedures have led to significant reductions in
approval times for generic drugs since 2002, and consequently will save
consumers billions more by generally reducing the time for developing
generic drugs and making them available.

The Agency has also taken steps to help improve the development process
to help lower the high cost of developing new drugs. In particular, FDA
is continuing to improve the methods by which assistance and advice is
provided to sponsors regarding what we believe are the best approaches
to develop new therapies and maximize the prospects for swift FDA approval.
These ongoing efforts are designed to provide sponsors with the best possible
information and thus increase the efficiency of the development process.
We expect that reforms in drug and biologic manufacturing requirements
should help reduce manufacturing costs by 20 percent. FDA has identified
several priority disease areas, such as cancer, diabetes and obesity,
and new technologies including gene therapy, pharmacogenomics and novel
drug delivery systems that are good candidates for efforts to clarify
regulatory pathways and clinical endpoints.

FDA is also working to prevent adverse events through new rules that
would require bar coding for drugs and better ways to track adverse events
automatically with the goal of preventing billions of dollars in unnecessary
health care costs each year. FDA’s final rule requiring bar coding
of drug is estimated to have net economic benefits of approximately $3.5
billion per year. Avoiding such preventable medical complications will
also help reduce health care costs, while enhancing quality and safety.
In addition, the Agency is striving to promote electronic prescribing,
to improve quality and reduce prescription costs as well.

IMPORTATION OF PRESCRIPTION DRUGS

Sixty-five years ago, Congress responded to widespread instances of unsafe
drugs by directing FDA to create a system for assuring that Americans
have a drug supply they can trust will not harm them. Over forty years
ago, Congress required that legal drugs be proven to be effective as well,
because modern medicines – when they are produced, distributed,
prescribed, and used properly – should not only be safe but also
should prevent the many complications and side effects of diseases. More
recently, in 1988, Congress enacted the Prescription Drug Marketing Act
(PDMA) to establish additional safeguards to prevent substandard, ineffective,
or counterfeit drugs from entering the U.S. Under PDMA, it is illegal
for anyone other than the drug’s original manufacturer to re-import
a prescription drug into the U.S. that was manufactured in the U.S. This
law was enacted with strong bipartisan support because of high-profile
cases of unsafe and ineffective drugs entering the U.S. in large volumes.
In one instance, over 2 million unapproved and potentially unsafe and
ineffective Ovulen-21 “birth control” tablets from Panama
were distributed throughout the U.S. In another case, a counterfeit version
of Ceclor, a widely used antibiotic at the time, found its way into the
U.S. drug distribution from a foreign source. Over the years, FDA’s
dedicated professional staff has employed PDMA and other authorities to
build a drug safety infrastructure to ensure that Americans enjoy the
highest-quality drug supply in the world.

Unfortunately, the drug supply is under unprecedented attack from a variety
of increasingly sophisticated threats. This is evident in the recent significant
increase in efforts to introduce counterfeit drugs into the U.S. market.
FDA has seen its number of counterfeit drug investigations increase four-fold
since the late 1990s. Although counterfeiting was once a rare event, we
are increasingly seeing large supplies of counterfeit versions of finished
drugs being manufactured and distributed by well-funded and elaborately
organized networks. At the same time, inadequately regulated foreign Internet
sites have also become portals for unsafe and illegal drugs. For example,
FDA recently worked with domestic and international authorities to shut
down a website that was advertising “FDA-approved” and safe
“European” birth control pills and other drugs, but was actually
responsible for importing ineffective, counterfeit drugs. Evidence strongly
suggests that the volume of these foreign drug importations is increasing
steadily, presenting an increasingly difficult challenge for Agency field
personnel at ports-of-entry, mail facilities, and international courier
hubs, and our laboratory analysts and border and law enforcement partners.

FDA is doing its best to use its limited international authorities and
resources to stop the increasing flow of violative drugs into this country,
but the task is daunting. Each day, thousands of individual packages containing
prescription drugs are imported illegally into the U.S. FDA’s Office
of Regulatory Affairs has inspectors who work in the field who perform
investigational work pertaining to imported prescription drugs, a job
that is not limited to inspections at ports-of-entry.

SAFETY CONCERNS RELATING TO IMPORTATION

FDA remains concerned about the public health implications of unapproved
prescription drugs from entities seeking to profit by getting around U.S.
legal standards for drug safety and effectiveness. Many drugs obtained
from foreign sources that either purport to be or appear to be the same
as U.S.-approved prescription drugs are, in fact, of unknown quality.
Consumers are exposed to a number of potential risks when they purchase
drugs from foreign sources or from sources that are not operated by pharmacies
properly licensed under state pharmacy laws. These outlets may dispense
expired, subpotent, contaminated or counterfeit product, the wrong or
a contraindicated product, an incorrect dose, or medication unaccompanied
by adequate directions for use. The labeling of the drug may not be in
English and therefore important information regarding dosage and side
effects may not be available to the consumer. The drugs may not have been
packaged and stored under appropriate conditions to prevent against degradation,
and there is no assurance that these products were manufactured under
current good manufacturing practice standards. When consumers take such
medications, they face risks of dangerous drug interactions and/or of
suffering adverse events, some of which can be life threatening. More
commonly, if the drugs are subpotent or ineffective, they may suffer complications
from the illnesses that their prescriptions were intended to treat, without
ever knowing the true cause.

Patients also are at greater risk because there is no certainty about
what they are getting when they purchase some of these drugs. Although
some purchasers of drugs from foreign sources may receive genuine product,
others may unknowingly buy counterfeit copies that contain only inert
ingredients, legitimate drugs that are outdated and have been diverted
to unscrupulous resellers, or dangerous sub-potent or super-potent products
that were improperly manufactured. Furthermore, in the case of foreign-based
sources, if a consumer has an adverse drug reaction or any other problem,
the consumer may have little or no recourse either because the operator
of the pharmacy often is not known, or the physical location of the seller
is unknown or beyond the consumer’s reach. FDA has only limited
ability to take action against these foreign operators.

The Agency has responded to the challenge of importation by employing
a risk-based enforcement strategy to target our existing enforcement resources
effectively in the face of multiple priorities, including homeland security,
food safety and counterfeit drugs. However, this system, as it works today,
is already overwhelmed by the number of incoming packages, and this presents
a significant ongoing challenge for the Agency.

Recent spot examinations of mail shipments of foreign drugs to U.S. consumers
revealed that these shipments often contain dangerous or unapproved drugs
that pose potentially serious safety problems. In 2003, inspectors found
that the majority of the packages examined in these “blitzes”
contained illegal, unapproved drugs. Last summer, FDA and CBP conducted
blitz examinations on mail shipments at the Miami and New York (JFK) mail
facilities in July, and the San Francisco and Carson, California, mail
facilities in August. In each location, the agencies examined packages
shipped by international mail over a 3-day time span. Of the 1,153 shipments
examined, the overwhelming majority (1,019 packages, or 88 percent) contained
unapproved drugs. The drugs arrived from many countries. For example,
16 percent entered the U.S. from Canada; 14 percent were from India; 14
percent came from Thailand, and 8 percent were shipped from the Philippines.

A second series of import blitz exams, conducted in November 2003, also
revealed potentially dangerous, illegally imported drug shipments. Of
the 3,375 products examined, 2,256 or 69 percent were violative. FDA found
recalled drugs, drugs requiring special storage conditions and controlled
substances. These blitz exams were performed at the Buffalo, Dallas, Chicago
and Seattle international mail facilities and, for the first time, the
private courier hubs at Memphis and Cincinnati. Canadian parcels appeared
most frequently (80 percent of the mail parcels), while 16 percent were
from Mexico, and the remaining 4 percent came from Japan, the Netherlands,
Taiwan, Thailand and the United Kingdom.

Examples of the potentially hazardous products encountered during the
exams include:

Unapproved drugs such as 1) alti-azathioprine an immunosupressant
drug that can cause severe bone marrow depression and can be associated
with an increased risk of infection and cancer development; and 2) human
growth hormone, which can have serious side effects if used inappropriately
or in excessive doses.

Drugs withdrawn from the U.S. market for safety reasons such as Buscapina,
which appears to be the drug dipyrone, removed from the market in 1977
due to reports of association with agranulocytosis -- a sometimes fatal
blood disease.

Animal drugs not approved for human use such as Clenbuterol, a drug
approved for the treatment of horses but also known as a substance of
abuse in the “body building” community and banned by the
International Olympic Committee.

Potentially recalled drugs -- American consumers were sent Serevent
Diskus and Flovent Diskus medicines from Canada for the treatment of
asthma. Shortly after the blitz, certain lots of the Canadian versions
of these drugs were recalled in Canada.

Drugs requiring risk management and/or restricted distribution programs
-- For example, Canadian-manufactured isotretinoin, which in the U.S.
is subject to a stringent risk management plan, under which prescribers
are required to screen, educate and monitor patients to avoid certain
serious risks such as birth defects.

Drugs with inadequate labeling such as those with missing dosage
information or labeling that is not in English.

But its not just FDA that has identified both legal and safety concerns
about importation of prescription drugs, so have many other professional
regulators, including state pharmacy boards and most recently courts.
On November 6, 2003, Federal District Court Judge Claire V. Eagan, U.S.
District Court for the Northern District of Oklahoma, issued a decision
in United States v. RX Depot, Inc. and RX of Canada LLC, granting a preliminary
injunction to immediately prevent these defendants who operate business
that import prescription drugs from Canada, because such unapproved drugs
were a clear violation of the FD&C Act. In addition to her unequivocal
findings of law, the Judge concluded that these companies could not assure
the safety of the drugs they have been importing and, as a result, in
violating the law have put Americans at serious risk. The Judge concluded
that “unapproved prescription drugs and drugs imported from foreign
countries by someone other than the U.S. manufacturer does not have the
same assurance of safety and efficacy as drugs regulated by the Food and
Drug Administration.” She continues: “Because the drugs are
not subject to FDA oversight and are not continuously under the custody
of a U.S. manufacturer or authorized distributor, their quality is less
predictable than drugs obtained in the
United States.”

RECENT STATE ACTIONS

Despite this ruling and the concerns raised by the Agency, recently,
several governors and mayors have proposed to create systems whereby their
employees and/or constituents could be directed to Canadian pharmacies
for purchasing Canadian drugs. FDA has spoken with a number of such officials
about our concerns, and many have declined to proceed and have turned
to other legal, proven ways to safely reduce drug costs. However, some
states and localities, including the state of Minnesota and the state
of Wisconsin have proceeded to establish state run websites linking citizens
to entities dispensing drugs purportedly from Canada.

Recent research by the state of Minnesota pointed out significant problems
related to purchasing non-FDA approved pharmaceuticals from foreign Internet
pharmacies.
Even Canadian pharmacies that participate in the Canadian Internet Pharmacy
Association were observed engaging in problematic practices during a single,
voluntary, pre-announced “visit” by Minnesota State officials.
Minnesota State health officials noted dozens of safety problems, such
as:

1) several pharmacies used unsupervised technicians, not trained pharmacists,
to enter medication orders and to try to clarify prescription questions;
2) one pharmacy had its pharmacists review 100 new prescriptions or 300
refill prescriptions per hour, a volume so high that it would have been
impossible to assure safety;
3) one pharmacy failed to label its products, instead it shipped the labels
unattached in the same shipping container, even to patients who received
multiple medications in one shipment; and
4) drugs requiring refrigeration were being shipped un-refrigerated with
no evidence that the products would remain stable.

At least one of the Canadian pharmacies visited by Minnesota health officials
dispensed many drugs that apparently were not even of Canadian origin,
and many of the drugs were obtained from prescriptions that had been written
and rewritten across multiple Canadian provinces. These types of systematic
safety problems, which appear to be a common way of doing business, would
generally be clear regulatory violations that would not be tolerated under
the comprehensive system of Federal and state regulation of drug safety
in the U.S.

DRUG COUNTEFEITING

In addition, counterfeiting of prescription drugs is a growing global
concern. In fact, counterfeiting of drugs is commonplace in many countries.
In the U.S. counterfeiting of drugs has been kept to a minimum because
of our extensive system of laws, regulations, and enforcement by Federal
and state authorities. As a result, Americans have a high degree of confidence
in the drugs they obtain from their local pharmacy. In recent years, however,
FDA has seen growing evidence of efforts by increasingly well-organized
counterfeiters, backed by increasingly sophisticated technologies and
criminal operations, intent on profiting from drug counterfeiting at the
expense of American patients.

To respond to this emerging threat, FDA convened a Counterfeit Drug Task
Force that received extensive comment and ideas from security experts,
Federal and state law enforcement officials, technology developers, manufacturers,
wholesalers, retailers, consumer groups, and the general public. Based
on these comments, on February 18, 2004, FDA issued a report that contains
specific steps that can be taken now and in the future to protect consumers
from counterfeit drugs and secure the U.S. drug supply chain.

The report’s framework describes how to strengthen our drug safety
assurances against modern counterfeit threats through a multilayered strategy
that includes modern anti-counterfeiting technologies. Promising developments
such as “track and trace” technologies that cannot be faked
like a paper drug pedigree, and verification technologies built not only
into tamper-resistant drug packaging but also into the drugs themselves
will make our job of verifying the legitimacy of drug products much easier.
FDA is working to speed the availability of these anti-counterfeiting
technologies, but these technologies have not yet been proven, and they
are intended to complement and reinforce an underlying system for assuring
the safety and effectiveness of prescription drugs.

Thus, anti-counterfeiting technologies hold great promise for strengthening
our legal drug distribution system, but to be effective they must be used
in conjunction with effective legal authorities.

IMPORTATION PROPOSALS

At a time when FDA faces more challenges than ever in keeping America’s
supply of prescription drugs safe and secure, legislation to liberalize
drug importation without providing concomitant enhancements in FDA’s
authorities and resources to assure the safety of these imports could
seriously compromise the safety and effectiveness of our drug supply.
The volume of importation that could result from enactment of these bills
could overwhelm our already heavily burdened regulatory system. Many of
these bills fail to provide FDA with adequate authority or resources to
establish and regulate the major new “legal” channels for
incoming foreign drugs - manufactured, distributed, labeled, and handled
outside of our regulatory system - or even to ensure their safety. Some
of these proposals would even limit FDA’s existing authorities,
which are already being stretched. They would impose unprecedented restrictions
on FDA’s ability to inspect and test drugs, and FDA’s authority
to block the distribution of drugs we think are unsafe.

Today, FDA drug approvals are manufacturer-specific, product-specific,
and include many requirements relating to the product, such as manufacturing
location, formulation, source and specifications of active ingredients,
processing methods, manufacturing controls, container/closure system,
and appearance. Under section 801 of the FD&C Act, only manufacturers
may import drugs into the U.S. The drugs must be produced in FDA inspected
facilities. These facilities and the drugs produced in them are currently
covered by the U.S. regulatory system, and it is legal to import these
drugs.
We want to be clear that our objections to legislative proposals that
would create large, legal channels for drugs to enter our drug supply
without assurances of safety are based on concerns that they will create
substantial drug safety problems without clear, large-scale, long-term
benefits. FDA has particularly raised concerns about legislative proposals
that would create such channels by weakening our existing safety protections
rather than providing the necessary resources or additional authorities
to enable the Agency to assure drug safety and security. Furthermore,
our economic experts as well as many others have raised concerns about
the limitations of potential longer-term benefits and savings that could
be realized from imported drugs. The Congressional Budget Office has estimated
that the savings from even broad, multiple-country importation proposals
would be smaller than can be obtained through the generic drug reforms
that Congress and FDA are in the process of implementing now. Even the
Canadian Internet pharmacy operators have said that they cannot provide
safe drugs for Americans on a large scale. These are important concerns,
but that does not mean that we are opposed to undertaking a thorough effort
to determine whether and how importation could be accomplished safely.
But this cannot be accomplished by fiat or with a presumption of safety.

Some Members of Congress are working on the difficult challenge of identifying
the resources and authorities necessary to assure safety for certain types
of imported drugs. This is a much more constructive approach than simply
declaring imported drugs to be legal or restricting FDA’s authorities
to keep the U.S. drug supply safe. To help determine whether and what
specific authorities and resources would provide for the safe importation
of drugs, the conference report of the new Medicare law gave the Secretary
of Health and Human Services specified requirements for a study of drug
importation. Among these requirements, the conference report asked the
Secretary to “identify the limitations, including limitations in
resources and in current legal authorities, that may inhibit the Secretary’s
ability to certify the safety of imported drugs” and to “estimate
agency resources, including additional field personnel, needed to adequately
inspect the current amount of pharmaceuticals entering the country.”

MEDICARE IMPORTATION STUDY AND TASK FORCE

Last year, when Congress enacted the Medicare Modernization Act, it recognized
these safety issues and included language that required that the Secretary
certify the safety of prescription drugs prior to authorizing their importation.
At the same time, Congress directed the Department to conduct a comprehensive
study and prepare a report to Congress on whether and how importation
could be accomplished in a manner that assures safety. The Department
is currently working on that analysis and has created an intergovernmental
task force to steer this effort to completion by the Congressional deadline
later this year.

The taskforce includes representatives from FDA, the Centers for Medicare
and Medicaid Services, Customs and Border Protection, and the Drug Enforcement
Administration. The taskforce is bringing together a wide variety of health
care stakeholders to discuss the risks, benefits and other key implications
of the importation of drugs into the U.S., and to offer recommendations
to the Secretary on how to best address this issue in order to advance
the public health. The statutory language and the conference report provide
detailed, comprehensive requirements for the importation study.

As an integral part of the study process, the task force is holding a
series of meetings to gather information and viewpoints from consumer
groups, health care professionals, health care purchasers, industry representatives
and international trade experts. This process affords Congress and the
Administration an opportunity to fully address the complex public health,
economic and legal questions in order to make appropriate and effective
recommendations about importation of prescription drugs and the associated
fundamental changes to the FD&C Act and in safety resources that may
be required.

CONCLUSION

The standards for drug review and approval in the U.S. are the best in
the world, and the safety of our drug supply mirrors these high standards.
The employees of FDA constantly strive to maintain these high standards.
However, a growing number of Americans are obtaining prescription medications
from foreign sources. U.S. consumers often seek out Canadian suppliers,
sources that purport to be Canadian, or other foreign sources that they
believe to be reliable. While some foreign drug manufacturers submit their
products to FDA for approval, the imported drugs arriving through the
mail, through private express couriers, or by passengers arriving at ports-of-entry
are often unapproved drugs that may not be subject to any reliable regulatory
oversight. FDA cannot assure the safety of drugs purchased from such sources.

The vigilance of FDA and BCBP inspectors is an important tool in detecting
imported products that violate the FD&C Act. Given the available resources
and competing priorities facing these agencies, however, experience shows
that inspectors are unable to visually examine many of the parcels containing
prescription drug products that arrive through the mail and private courier
services each day. The growing volume of unapproved imported drugs, which
often are generated from sales via the Internet, presents a formidable
challenge.

FDA firmly believes that we can and should do a much better job of making
safe and innovative drugs more affordable in the United States, but to
succeed we need to find safe and affordable solutions that, when implemented,
do not put consumers at risk. We appreciate and support the bipartisan
commitment to making drugs more affordable for seniors and other consumers
and are working hard to achieve the goals of safety and affordability.
We believe that Americans should not have to settle for less.

We all agree more needs to be done to continue to address the high cost
of prescription medicines. But we must be cautious and deliberate as we
consider proposals to accomplish this goal. FDA would urge that Congress
ensure that any changes to our drug regulation system do not require American
citizens to give up the “gold standard” in drug safety that
has become a hallmark in this country. FDA’s scientists, doctors,
health care experts and regulators must be empowered to protect us from
bad medicine. We owe it to patients today and tomorrow to make our medical
future brighter, healthier and more affordable.

Thank you for the opportunity to testify. I look forward to responding
to any questions you may have.